Project Decisions: The Art and Science

ProjectThink: Why Good Managers Make Poor Project Choices

Topics Covered:

Project Project Management

Project Decision Analysis

Project Risk Analysis

Event Chain Methodology

Psychology of Project Management

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One of the fundamental questions of project management is, "What will be the duration and cost of the project given the multiple risks and
uncertainties?" Program Evaluation and Review Technique (PERT) and Monte Carlo analysis may help to answer these and other questions.
Monte Carlo analysis is a straightforward approach to deal with complex sets of project uncertainties. However, both Monte Carlo and PERT have
a number of limitations that are related to the manner in which we identify and interpret uncertainties.

There are so many analytical techniques and tools, some of which are very complex and require a lot of effort to perform and
others which are very industry specific. One of the very simple techniques is expected value analysis. This analysis is a choice engineering
method, which means that it is more of a mental exercise rather than a strict and formal project management process. At the same time,
going through the expected value thinking process may significantly improve quality of decisions.

In this paper we are going to learn how to deal with risk. You may be familiar with the PMBOK Guide which describes a formalized
approach to risk management. We are going to use a slightly different approach and focus on how choice engineering can be used for
anaging project risk. We will discuss a few simple techniques that you can use that will improve your ability to handle risk during
the course of your projects.

The article shows how to use decision tree analysis in project management as part of quantitative risk and decision analysis. Decision trees
can be generated based on project schedules. It helps to make decisions during a course of a project. The article also explain a concept of value of
information in project management.

Identifying which activities have the most affect on the project and understanding how activities are correlated with each other is important
for establishing project priorities. Our judgement about correlation and causation is affected by a number of biases, such as illusory and invisible
correlations, covariation assessment, and others. Sensitivity analysis helps to discover correlations within a project.

In this paper we will learn how to estimate probability and impact of the different events. We will also try to answer another question,
what to do with them. Risk assessment is not trivial as it is subject to multiple mental errors. Among them are zero risk bias,
loss aversion, ignoring base rate frequencies, gambler's fallacy, overestimating the probability of compound events, and others.
People's response to risk and uncertainty varies due to the different risk attitudes of individuals and groups. Risk attitude measures
how much risk an individual or group is willing to accept and is based on different factors, including emotions and biases.

In this paper you will learn how choice engineering can be used to improve corporate culture, and as a result, improve the bottom line of your
company. In some most large companies, issues related to the corporate culture lead to disengaged employees and subsequent loss of
productivity. You learn a few choice engineering tricks that will create a positive working environment for your team members, your boss, and yourself.

People often make poor choices because of illusions. At the same time, they don't perform any analysis that would improve their decisions
because of other illusions to which they are subject. Is there a solution to this problem? Establishing effective processes is always considered
an effective way to improve project management. For example, if a project manager follows mandatory guidelines in time, scope, cost, risk management
and other knowledge areas, this should improve the quality of the decisions made during the execution of the project and reduce chance of failure. But
such processes are hard to implement, often expensive, and grudgingly followed if at all by some team members once they have been introduced. In many cases,
especially for smaller projects, it would be more beneficial to create an environment within which people are encouraged on their own volition to make
better choices, rather than mandate these choices. This is called choice engineering.

Structured analysis of the situation helps project managers to overcome illusions can improve their judgment. However, more likely than not, prior to making a decision people have not performed any structured analysis, or they misinterpret the results of the analysis. Complicating matters, sometimes the analysis is extremely complex and results may be incorrect. Even if the analysis is performed and is correct, often people do not realize its value. As a result, even now where we have highly trained experts with access to powerful computers, running the most advance advanced mathematical models, we still bear witness to the outcome of so many poor quality decisions.

Risk management become a critical component of project management processes. Quantitative schedule risk analysis methods enable project managers
to assess how these risks and uncertainties will affect the project schedule. Event chain methodology is an uncertainty modelling and schedule network
analysis technique that focuses on identifying and managing the events and event chains that affect projects. Event chain methodology improves the accuracy
of project planning simplifying the modelling and analysis of uncertainties in the project schedules. As a result, it helps to mitigate the negative impact
of cognitive and motivational biases related to project planning. Event chain methodology is currently used in many organizations as part of their project
risk management process.

It is not uncommon to see good and experienced project managers make poor decisions that led to issues and eventually project failures.
What is the explanation: misjudgement, lack of experience, or do some project managers just run out of luck? People make similar repeatable
mental mistakes when they make choices, whether they are mothers trying to decide which is the fastest route to their children's soccer match or managers
of large companies who are trying to decide which design they should use for their next product launch. These illusions are a primary source of human error
in project management, errors that can eventually lead to project failures.

Originally developed by ecologists, adaptive management has become a powerful framework for project management. It is a structured and systematic process to continually improve decisions and practices by learning from the outcomes of previous decisions. Adaptive management includes a number of organizational principles, such as iterative development and avoidance of irreversible decisions. Adaptive management relies of metrics and quantitative methods to integrate actual project performance to the management of projects.

Frustrated developer's Syndrome (FDS) is a "disease" that can afflict corporate culture, particularly decision-making, efficiency, and productivity. FDS is a problem because frustrated project team members will not produce good projects.

Any projects are affected by a large number of events (risks), which can significantly change the course of a project. These events may form groups of related events or event chains. The event chains methodology can contribute to reducing uncertainties in project scheduling and significant simplification of process of modeling, tracking, and analysis of project schedule.

Quantitative Risk Analysis has become an important component of project management. Microsoft Project implements Qualitative Risk Analysis methodology. But what about quantitative analysis? Learn how to use Microsoft Project with third party tools to perform quantitative risk analysis.

Project management is the art of making right decision. Project managers are faced by huge array of choices. Should different supplier be used to improve the quality of a product? Should additional team member be brought in to improve the development performance? Learn how decision analysis process can be used on project management.

Formalized decision analysis process helps IT project manager to make a right decision. Learn how to use decision analysis techniques to mitigate negative impact to psychological biases and select most effective project decision.

Managing of risk and uncertainties during the course of a project has become one of the priorities of the software project manager. Event chains methodology is a practical approach to managing software projects that contain multiple uncertainties.